If firms sharply increase the number of investment projects undertaken when interest rates fall and sharply reduce the number of investment projects undertaken when interest rates increase, then, ignoring the crowding out effect,
A) expansionary fiscal policy will be very effective.
B) expansionary monetary policy will be very effective.
C) contractionary fiscal policy will be very effective.
D) contractionary monetary policy will not be very effective.
Answer: B) expansionary monetary policy will be very effective.
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Lou buys a Star Wars: The Force Awakens poster from Evan for $30 and resells it on eBay for $60. Which of the following statements is false?
A) Lou has probably incurred some costs in connection with this sale. B) It is possible that Evan has earned some producer surplus from this transaction. C) Lou has earned some arbitrage profits, assuming that transactions costs are negligible. D) The transaction has made Evan worse off because he undersold the poster.
If companies who took into account an externality want to supply more at any given price compared to the original supply, they must have addressed a:
A. positive externality. B. negative externality. C. network externality. D. social externality.
Protection of an infant industry should be withdrawn once that industry:
a. charges the same price as foreign competitors. b. goes public on the stock exchange. c. raises a large amount of sales revenue. d. achieves sufficient size to compete with foreign firms. e. earns enough profit as a result of the subsidies to remain in business.
Which of the following best explains why productive workers can command high wages?
a. the bargaining power of labor unions. b. the presence of minimum wage legislation. c. wage and price controls that reflect the political power of labor organizations. d. competition among employers for productive workers.